Fitch Affirms Petrobras' Ratings.

CHICAGO & RIO DE JANEIRO, Brazil -- Fitch Ratings has affirmed the ratings of Petroleo Brasileiro S.A.'s (Petrobras). The Rating Outlook remains Stable. These rating actions follow the announcement by Petrobras, Braskem and the Ultra Group that they have reached an agreement to acquire the Ipiranga Group's petrochemical, refining and fuel distribution assets.

Fitch has affirmed the following ratings:

--Foreign currency issuer default rating (IDR) at 'BB+';

--Senior unsecured notes due to 2008 at 'BB+';

--Senior unsecured notes due to 2011 at 'BB+';

--Senior unsecured notes due to 2013 at 'BB+';

--Senior unsecured notes due to 2014 at 'BB+';

--Senior unsecured notes due to 2016 at 'BB+';

--Senior unsecured notes due to 2018 at 'BB+';

--National rating at 'AAA(bra)';

--Second issuance of debentures due to 2012: 'AAA(bra)'

--Third issuance of debentures due to 2010: 'AAA(bra)'

The multi-part transaction, which is expected to be concluded by the end of 2007, should result in Petrobras owning the fuel distribution assets of Ipiranga that are based in the North, Northeast and Midwest regions of Brazil, 33% of the oil refinery Refinaria de Petroleo Ipiranga (RIPI) and 40% of the petrochemical assets of Ipiranga Quimica (IQ), which has investments in Ipiranga Petroquimica (IPQ) and Copesul. Petrobras is expected to pay about $1.3 billion for these investments.

The fuel distribution assets being purchased by Petrobras consist of 3,324 service stations. IPQ operates five plants with a combined production capacity of 730,000 tons per year of polyethylene and polypropylene, while Copesul is the second largest naptha cracker in Latin America with an annual production capacity of 3.3 million tons per year of basic chemicals, including 1.25 million tons of ethylene. RIPI is capable of refining 17,000 barrels of oil per day.

At the end of 2006, Petrobras had BRL58.4 billions (USD27.3 billions) of total debt and BRL29.2 billion (USD13.6 billions) of cash and marketable securities. During 2006, the company generated BRL52 billions (USD24 billions) of EBITDA. These acquisitions increase Petrobras' presence in the Brazilian petrochemical sector and enhance its fuel distribution capabilities. Given the low leverage at the entities to be acquired and Petrobras' strong capital structure, the transaction is viewed to be neutral to mildly positive for Petrobras' credit profile.

The ratings of Petrobras are supported by substantial proved hydrocarbon reserves and increasing upstream output, recognized leadership in offshore exploration and production, a favorable international product price environment and its dominant domestic market position. The company further benefits from material international operations and its shift to a net export position, which supports the generation of foreign currency cash flow. These factors are tempered by vulnerability to fluctuations in international commodity prices, exposure to local political interference, currency risk, domestic market revenue concentration, and significant medium-term capital-investment requirements linked to the company's ambitious strategic plan.

Petrobras is an integrated international oil and gas company engaged in the exploration, development and production of hydrocarbons and in the refining, marketing, transportation and distribution of oil and a wide range of petroleum products, petroleum derivatives, petrochemicals and liquid petroleum gas. By law, the federal government must hold at least a majority of Petrobras' voting stock.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.